Research Update: SEMCO Energy Inc. Ratings Lowered One Notch Following Parent Downgrade; Outlook Negative

SEMCO Energy Inc.'s parent company, AltaGas Ltd., was downgraded to 'BBB-' from 'BBB', reflecting our view that, notwithstanding asset sales and a dividend cut to fund its capital program, AltaGas' financial metrics remain pressured. We lowered our issuer credit rating on SEMCO to 'BBB-' from 'BBB' based on our one-notch downgrade of parent AltaGas. At the same time, we lowered the ratings on SEMCO's senior secured notes to 'BBB+' from 'A-'. The negative outlook reflects our negative outlook on parent AltaGas, which in turn reflects uncertainty around the timing and pricing for AltaGas' proposed asset sales to meet its cash needs for the next two years. We expect that AltaGas will reduce debt, and that its adjusted FFO to debt

...+ SEMCO Energy Inc.'s parent company, AltaGas Ltd., was downgraded to '###-' from '###', reflecting our view that, notwithstanding asset sales and a dividend cut to fund its capital program, AltaGas' financial metrics remain pressured. + We lowered our issuer credit rating on SEMCO to '###-' from '###' based on our one-notch downgrade of parent AltaGas. + At the same time, we lowered the ratings on SEMCO's senior secured notes to '###+' from 'A-'. + The negative outlook reflects our negative outlook on parent AltaGas, which in turn reflects uncertainty around the timing and pricing for AltaGas' proposed asset sales to meet its cash needs for the next two years. We expect that AltaGas will reduce debt, and that its adjusted FFO to debt will stay above 10% by 2020, with regulated utility EBITDA representing approximately 50% of AltaGas' consolidated EBITDA....

Research Update